Business Loans 101

If you are running a company and you need additional money you can either deal with investors or attempt to get business loans. There are some advantages to both really. Investors offer the advantage of not having to repay a loan, especially during the fragile first couple of years you are in operation. You also divide the risk somewhat between you and your investors. A loan on the other hand gives you the advantage of not having to share profit, or decision making. For the scope of today’s discussion however we will discuss borrowing and what to expect from it.

Before you even consider getting outside funding you should setup a well thought out business plan. To create a plan with the level of detail required can be a very daunting task, but fortunately there are some resources to assist you. In addition to countless for profit business planning organizations, one of the best resources I always recommend is the small business administration. Your local SBA office should be able to set you up with a consultant from their office to sit down with you to work through your plan step by step. They have been providing this service almost since they were first established in 1953 and have a wide range of expertise on the topic. Having a plan will not only help you get funding (it’s most likely required by the lender anyway) it will also quantify all of your assumptions so you can test where they are wrong.

So, if you have a solid plan in hand, you are ready to start looking for lenders. But how do you find anyone willing to lend to someone in your circumstances? Again, there are many loan consultancy firms, and many of them are worth checking out, but I recommend the SBA as a good step one for this purpose as well. They can help you find lenders for whom you will meet their criteria, and they also have the SBA loan program that can be very useful to you.

What is this SBA program and how can it help you get business loans? It was established right along with the SBA in attempt to help small companies succeed in America. The program sets certain guidelines and criteria, which mean you, can walk into negotiations with a clear idea of what to expect.

So in short, get a business plan, find a good lender, and don’t be afraid to use resources like the SBA to walk you through the process.